Best Insurance Stock - U.S. Title Insurance industry outlook 2013 by Fitch Ratings : Fitch Ratings maintained its stable rating outlook on the U.S. Title Insurance industry. The outlook reflects a belief that rating actions for the industry will on balance approximate current levels over the next 12 - 18 months as financial performance has improved recently and capital levels remain adequate based on several measures.

A new special report '2013 Outlook: U.S. Title Insurance Industry.' published today highlights key factors affecting title insurer ratings, reviews financial performance in 2012, and assesses industry prospects for 2013.

Operating profit margins on a GAAP basis for Fitch's title universe rose to 10.3 percent in the first nine months of 2012 versus 6.1 percent in the prior year. Earnings improved for all underwriters, but larger players First American Financial (FAF) and Fidelity National Title (FNF) posted the highest margins. Title revenues through nine months 2012 increased by over 15 percent as refinancing activity exceeded expectations and housing markets stabilized. The period's 90.7 percent underwriting combined ratio reached levels unseen since 2006, as growth reduced expense ratios and claims experience improved as well.

The title insurance industry is benefitting from an improving housing market that is showing less home inventory and increasing home prices nationally. According to the National Association of Realtors (NAR), US housing prices rose in 2012 with many markets showing year-over-year home price growth for the first time since the beginning of the housing crisis. Economists attribute the price increase primarily to reduced housing inventory and, to a lesser extent, fewer homes sold in distress.

The Mortgage Bankers Association of America (MBA) forecasts mortgage originations to decline to $1.3 billion in 2013 and just over $1 billion in 2014, compared with $1.7 billion in 2012. The drop is driven by a projected material decline in refinance activity over the next two years, which is expected to be somewhat offset by greater purchase activity.

Fitch continues to view the industry as adequately capitalized, although individual company capital strength varies considerably. Fitch's view is based on both a non-risk adjusted approach such as net written premiums to surplus and a risk adjusted approach via Fitch's Risk Adjusted Capital (RAC) model.